Global Crossing Head Willing to Make Up – Some –
401(k) Losses

October 2, 2002 (PLANSPONSOR.com) - In a dramatic
gesture yesterday, Global Crossing Chairman Gary Winnick said
he and his family would personally make up $25 million of the
losses incurred by workers in the firm's 401(k)
plan.

Not only did Winnick make the promise in front of a
hostile House subcommittee hearing, he also challenged
other company executives – specifically those at XO, Qwest
Communications, and McLeodUSA – to follow his example.
‘Step right up and write a check,’ he said, according to
Dow Jones.

Duty ‘Bound’

Winnick strenuously denied that he or others at the
company had engaged in insider trading or fraud.
However, he said that as chairman of the ailing company, he
owed it to the firm’s 14,000 current and former employees
to make them whole for the losses they suffered as the
value of their 401(k) accounts plummeted along with the
company’s share price.

He said he wanted to help the “Miss Crumplers of the
world,” appearing after hours of testimony from
former Global Crossing employees, including Lenette
Crumpler who told the committee she lost her entire 401(k)
savings from a 31-year period — $86,000 — when Global
Crossing went bankrupt in January (see
Global Crossing Workers
File Company Stock Suit
). Global Crossing had acquired the telephone company
Crumpler worked for, Frontier, in 1999.

Zero Sum?

While subcommittee chairman Representative Jim
Greenwood (R-Pennsylvania) described Winnick’s $25 million
offer as “magnanimous,” others were skeptical, if not
cynical. ‘I think he needs to add a zero to it,’ said
attorney Lynn Sarko, who represents Global Crossing
workers, saying the offer was less than one-tenth of the
losses Global Crossing employees had suffered.
Indeed, Representative Greenwood commented that
investors had lost $54 billion in the collapse of Global
Crossing.

Sarko, a Seattle attorney, noted that Winnick was only
offering to pay back what employees had contributed to the
retirement plan after Global Crossing acquired Frontier in
1999, and not the amounts they had paid in prior to that
time.

Joseph Nacchio, the former Qwest chief executive who
testified later Tuesday, firmly refused to follow Winnick’s
‘lead.’ Nacchio sold $235 million in Qwest stock but said
the company is not bankrupt and maintains retirement
plans.

“Mr. Winnick’s company went bankrupt. Qwest is not a
bankrupt company,” Nacchio said. “It has a pension plan,
and there are lots of reasons why the telecommunications
industry is on hard times.” Nacchio, ousted from
Qwest in June, said his own severance package was worth
about $12 million, according to Reuters (see
Shareholders Name
Qwest, Nortel in 401(k) Suits
).

Severance ‘Check’

Separately, WorldCom got approval to pay full severance
payments to thousands of laid-off workers whose termination
benefits were abruptly cut off in July when the nation’s
No. 2 long-distance carrier filed for bankruptcy-court
protection.
Judge Arthur Gonzalez of the U.S. Bankruptcy Court for the
Southern District of New York approved the request to pay a
total of about $36 million in severance, commissions,
health insurance premiums, and unused vacation pay to laid
off workers.

In order to get their severance, employees must sign a
release that bars them from later suing the company. The
release has been criticized as overly broad, leading some
employees to fear it would interfere with efforts to sue
over losses in their 401(k) retirement plans.